What About That Mortgage Payment?
Great Question from the Discussion Group!
A member of my discussion brought up a great concern that often holds folks back from their first rehab. As I recall, this was a big concern of my wife when I got started.
The concern is the mortgage payment and the question came in the form of, "What do I do if it takes months to rent my property and I have to make that mortgage payment?"
This is a VERY UNDERSTANDABLE CONCERN. Let's face it; folks start rehabbing houses because they don't have a lot of money...not to spend more.
Placing folks in your property on a rental basis will probably fill them quickest. My favorite method of holding property is placing folks in them on a rent-to-own basis. Rent-to-own properties take longer to place someone in your property, but the goal is to get someone in your property that eventually wants to own it so they approach the property with an ownership mentality. We hope they take better care of the place and eventually own it. I think it's worth the wait.
If you are selling, it really depends on the demand in your area. In some areas, houses are snatched up in minutes, while others take months. Still, if you accept an offer on day 1, it will take 30-45 days to close the sale most of the time.
But what about in the interim, before you rent of sell the property? If you are sweating out the mortgage payments while the house is empty, concentrate on these things:
- Buy property priced low enough that you get all your rehab money, plus some mortgage money from your hard money. This may mean waiting longer between purchases, or looking a little deeper. Trust me they are there. Find the right wholesaler, or ferret out these deals.
- Adjust your investment criteria and only consider properties that need cosmetic or "light" rehab. This equates to a "quick" rehab, so the house is quickly ready for marketing!
- Make your rehab process very efficient. In and out in a few weeks. Depending on the extent of the rehab, it CAN be done even with sizable rehabs. This is tough if you are doing it all yourself unless you have the time and you are a quick worker. It will only be a little easier if you are scheduling workers. You may have to pay a bit more for quicker service.
- Once you get the exterior all spruced up...making it your first step in the rehab process, get your signs out in the front yard and at cross streets. Start working the calls. There is a tactful way to prepare someone verbally for a house that isn't yet completed. So show them, or schedule showings for when you feel you can show the property without scaring them away. In other words, get as many fish on the line as possible, as quickly as possible. If you are selling, consider using a Realtor. They'll get your property on the multiple list service (MLS) and effectively make it available to every Realtor in your region to show. This will increase the numbers of showings exponentially.
With a little creativity, you can reduce the amount of time your property sits empty!